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Mobility of In-House Corporate Counsel

Even as in-house lawyers begin to align themselves more closely with their company's strategic business goals, they can still escape one of the disadvantages of working at a company: the noncompete agreement. Typically, companies require nonlegal employees (particularly tech staff and business professionals) who handle proprietary information to sign a noncompete agreement to protect company confidences if and when the employee moves to another job. But lawyers have never been subject to noncompetes, which are considered unethical because they impede the client's freedom to choose an attorney and restrict the attorney's ability to find subsequent employment.

Still, the issue of whether corporate counsel can be bound by noncompete agreements is a simmering issue (ABA Journal August 2006), according to Susan Hackett, general counsel of the Association of Corporate Counsel. Recently, a New Jersey ethics committee  affirmed that that neither outside nor in-house corporate counsel may be compelled to sign noncompete agreements, though corporations can require them to sign nondisclosure agreements. But even though most states continue to adopt the New Jersey approach, many corporations are now paying more attention to the issue of in-house lawyer mobility for several reasons. First, the legal profession is more transient now than ever. Says Susan Hackett:

"Everybody changes jobs these days," she says. "This is going to be a real toughie if people aren’t thinking with some level of informed guidance, and they don’t have a firmer understanding of what presents actionable conflicts as opposed to the daily norm of moving from one client to another."  Unlike law firms, which have spent years creating conflicts management systems, corporate legal departments are new to segregating new hires to avoid conflicts, Hackett says.

In addition, today's lawyers have greater corporate responsibilities, and their work is more intertwined with the business workings of a corporation.  As a result,

legal ethics expert Geoffrey C. Hazard Jr., like Hackett, predicts the profession will pay more attention to lawyer mobility and conflicts issues involving in-house lawyers. "More and more law gets practiced [in-house] at higher levels," says Hazard, a professor at the University of Pennsylvania Law School and the University of California’s Hastings College of the Law. "And so the problem of sensitivity correspondingly increases."

Professor Hazard also comments that noncompetes are superfluous since lawyers are ethically obligated to retain client confidences.

Is proprietary information held by corporations endangered by their inability to bind lawyers to noncompete agreements? Or are the ethical obligations that attorneys must abide sufficient to protect corporate clients when in house counsel depart? And is this issue more of a problem now than a decade ago? Let me hear your comments.

Posted by Carolyn Elefant on August 31, 2006 at 03:53 PM | Permalink | Comments (1)

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